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Investing.com -- Shares of Endeavour Silver Corp . (NYSE: NYSE:EXK; TSX: EDR) fell 8% after the company announced its expansion into Peru with the acquisition of Minera Kolpa, a copper stream, and a bought deal financing. The market response reflects concerns over the complexities and financial commitments involved in the transaction.
The acquisition, valued at $145 million, will be funded through a mix of cash, common shares, and contingent payments, along with approximately $20 million in net debt. Endeavour Silver (TSX:EDR) aims to bolster its position as a senior silver producer by adding the Huachocolpa Uno Mine in Peru to its portfolio, which is expected to increase the company’s production profile by roughly five million silver equivalent ounces based on 2024 production figures.
Despite the potential for growth, investors appear cautious about the immediate costs and the long-term implications of integrating the new assets. The transaction includes a cash payment of $80 million and $65 million payable in Endeavour’s common shares upon closing. An additional $10 million in contingent payments is also part of the deal, along with the assumption of Minera Kolpa’s existing net debt.
To fund the cash portion of the acquisition, Endeavour Silver has entered into a copper purchase agreement with Versamet Royalties Corporation and initiated a bought deal financing of common shares. The company will host a conference call and webcast to discuss the transaction details further.
The Huachocolpa Uno Mine, the main asset of Minera Kolpa, is a silver-focused polymetallic mining company with operations in Peru. Endeavour Silver’s CEO, Dan Dickson, commented on the strategic importance of the acquisition, stating, "Today marks a significant milestone in Endeavour’s journey to becoming a senior silver producer."
The company’s expansion into Peru is part of a broader strategy to grow its production and leverage its technical strengths in underground mining. The Kolpa mine, with a history of production growth and exploration upside, fits well with Endeavour’s operating capabilities. However, the immediate market reaction suggests investors are weighing the benefits against the financial outlay and risks associated with such an expansion.
Endeavour Silver’s stock movement today reflects the market’s assessment of the acquisition’s near-term costs and the work required to integrate the new assets successfully. The company’s future announcements and performance metrics following the closing of the transaction will be closely monitored by investors and industry analysts.
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